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1 | |
In general, we would expect that heavily advertised items |
| | A) | will be of lower quality than items that are not advertised. |
| | B) | will be of higher quality than items that are not advertised. |
| | C) | will have no tendency to be of different quality from items that are not advertised. |
| | D) | will be of lower quality than unadvertised products if the item is a service and of higher quality if the item is a material product. |
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2 | |
The full-disclosure principle assumes that sellers disclose to buyers even things they are not supposed to tell because |
| | A) | the buyer will view the seller as a liar if all is not told. |
| | B) | people are inherently conscientious and cannot live with themselves if they do not tell all. |
| | C) | the buyer will believe the worst about anything not disclosed. |
| | D) | sellers are usually outwitted by buyers into telling everything even though it is not in the seller''s interest to tell all. |
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3 | |
Why do local newspapers often have dating information services while small college newspapers do not? |
| | A) | College students have more time for search than do people in the working world. |
| | B) | The high level of student interaction and socializing typical on a college campus lowers the cost of individual information gathering. |
| | C) | College newspapers are more politicized and less reliable than local newspapers so students do not trust them. |
| | D) | College students are more outgoing and uninhibited than non-college people, and so they do not need a dating service. |
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4 | |
Lee, a 45-year-old marathon runner in excellent health, with no family history of heart disease, pays more for life insurance than Pete, age 37, who is 20 kilograms overweight, is a couch potato, and has lost his older brother to a heart attack. This apparent insurance premium mistake occurs due to |
| | A) | the lemons principle. |
| | B) | adverse selection. |
| | C) | a breakdown in the full disclosure principle. |
| | D) | statistical discrimination. |
| | E) | conspicuous consumption. |
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5 | |
Many desirable people avoid dating services because they view the process as subject to |
| | A) | the lemons principle. |
| | B) | adverse selection. |
| | C) | the full disclosure principle. |
| | D) | statistical discrimination. |
| | E) | conspicuous consumption. |
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6 | |
Some people of moderate income make a public display of their lifestyle even though they can not match the Mercedes/jet set standard of living. This behaviour is likely due to the following combination of explanations. |
| | A) | statistical discrimination and conspicuous consumption. |
| | B) | the lemons principle and the full disclosure principle. |
| | C) | conspicuous consumption and the full disclosure principle. |
| | D) | adverse selection and the lemons principle. |
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7 | |
Use the following information for the next three questions. My watch is worth $100. There is a 25% chance that it will be stolen from the locker room when I play racquetball. My utility function for money is U = (money)2. On the basis of this information, the expected value of my watch (in $) is ______ and the expected utility from my watch (in utils)is ________. |
| | A) | 100; 10,000 |
| | B) | 75; 7,500 |
| | C) | 75; 10,000 |
| | D) | 25; 2,500 |
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8 | |
I am able to buy an insurance policy to cover my watch against theft. How much (to the nearest cent) would I be willing to pay for the insurance? |
| | A) | 9.90 |
| | B) | 13.40 |
| | C) | 15.80 |
| | D) | 25.00 |
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9 | |
The insurance company that insures my watch will not insure it unless I pay a premium of |
| | A) | $13.40 |
| | B) | $15.80 |
| | C) | $25 |
| | D) | $75.00 |
| | E) | none of the above. |
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10 | |
If I were risk averse: |
| | A) | I would be willing to pay the insurance company the same amount as, but no more than, the amount that the risk lover would pay. |
| | B) | I would be willing to pay the insurance company more than the amount that the risk lover would pay. |
| | C) | I would not be willing to pay the insurance company as much as the risk lover would pay. |
| | D) | I could not answer this question without knowing what my specific risk averse utility function for money is. |
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2002 McGraw-Hill Higher Education